While the investment universe using environmental, social, and governance (ESG) criteria is increasing every year, the number of advisors competing for that capital is declining.
Two trends are driving the declining number of advisors. First, according to the New York Times, the majority of financial advisors are now over age 50 and heading for retirement. Second, the slower economic recovery in recent years has negatively impacted entry level compensation in financial services. Young people are heading to careers in the technology or pharmaceutical industries, for example, where they can make more money. That means fewer bright, talented young people are entering the advisor population. 1
So for the savvy advisor, this is a great opportunity to develop a niche as a SRI specialist. As I have written about in previous blogs, SRI is continuing to grow as a percentage of the publicly owned capital market asset base for institutional as well as retail investors. And new investment products continue to be developed so advisors can feel confident about meeting client needs for diversified portfolios.
Green bonds are a good example, with issues in several categories including corporate self-labeled bonds, asset backed securities, project bonds and supranational/international bonds. Advisors and investors can diversify across the categories or own shares of a mutual fund that does so to manage risk. The first two quarters of 2014 have seen a surge in fixed income capital market allocation to green bonds, which could surpass $40 billion in total issues in 2014 – more than triple 2013’s record breaking total of $14 billion. 2
The sustainable investment opportunity is clear today for advisors who understand the supply and demand dynamics at work within their industry and investors who understand the value of company due diligence related to ESG challenges in today’s economy.
2) http://about.bnef.com/5June 2014